Wednesday, September 18, 2013

Iraq Signs Consulting Contract With BP For Kirkuk Oil Field

In September 2013 Iraq’s Oil Ministry and British Petroleum (BP) signed a contract for the Kirkuk oil field in northern Iraq. This appeared to be controversial at first, because the field is in the disputed territories, and the Kurdistan Regional Government (KRG) has demanded that all deals for the field have to have its approval. BP is only doing technical work however. It is interested in developing Kirkuk as well, but the arguments between the central and regional governments will likely prevent that from happening any time soon.
The Kirkuk field stretches from the disputed territories into the Kurdistan region

BP will be evaluating the Kirkuk field for the Oil Ministry to see how to renovate it. The contract might be worth up to $100 million. The Kirkuk field is divided into three domes. BP will only be working on the two under Baghdad’s control, which are the Baba and Avana Domes. The corporation signed a preliminary deal for Kirkuk back in January after more than a year of talks. The Oil Ministry is interested in this work, because Kirkuk is the oldest field in the country having been discovered in 1927, and production has seen a steady decline. In the early 2000s it was pumping around 900,000 barrels a day. Today it is only producing approximately 260,000 barrels. It is therefore in desperate need of repair and restoration. BP is hoping to do this work, but so is Russia’s Lukoil. A production contract for Kirkuk has been held up due to Baghdad’s dispute with Kurdistan over who has control over oil policy. The KRG claims that any development deal signed with the Oil Ministry for Kirkuk would be illegal and unconstitutional, claiming that it must be involved. Kurdish officials have told BP that they can study the field, but not do any drilling or production work. The KRG occupies the northern dome, but its long-term ambition is to annex the entire area for its vast oil reserves. That’s why it has objected to any Oil Ministry production contract. That hasn’t stopped Baghdad from hearing offers, and it is obviously hoping to revive the field due to its declining output. The differences within the country over hydrocarbons have prevented that from happening so far, and will probably continue to do so in the foreseeable future.
The Kirkuk field is divided into 3 domes with the KRG controlling the northern Khurmala Dome and Baghdad running the other two (GEO ExPro)

The argument between Baghdad and the KRG over petroleum has been deadlocked for years now with no end in sight. Each claims that it has the sole authority to sign contracts and manage natural resources. Kirkuk is one centerpiece of this dispute, because it is coveted by Kurdistan. That’s why the BP signing made such headlines when it was announced. It was only for studying the field however, which the Kurds have agreed to. Until the larger issues over oil are resolved there’s little hope that either the central or regional governments will be able to move ahead with their plans for Kirkuk.


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